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tv   Mad Money  CNBC  November 9, 2012 6:00pm-7:00pm EST

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[ applause ] >> hey, i'm cramer. welcome to a special veteran's day edition to "mad money." some people want to make friends. i just want to salute our troops and help them and you try to make some money. that's my mission with that said, on a day when we honor the service of our nation's veterans, it's worth asking if the partisan warfare may not be as bad as we thought. after a week that we got
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hammered, where spending cuts and tax increases could send our country back into a recession that we thought we were done with, today apple just got some lift. thanks to some council tory statements from president obama and john boehner, the speaker of the house. which made me feel like maybe you don't have to be insane to believe you can get a positive resolution here. i'm a cynical guy but even i think the short sellers are being too glib and the longs are too terrified, given the facts on the ground. don't get me wrong. i'm not saying the fiscal cliff will definitely be bridged but things could go right. the democrats and republicans could work together, as crazy as that sounds, and you have to take that possibility of a positive into account.
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speaking of a fiscal cliff, we have to hear more beyond what we heard today. every minute that goes by without a deal is a minute that could drive us closer to the brink and it colors my whole show now. i'm more sane about bridging the cliff than i was yesterday. but as the son of a veteran, if we don't get a deal soon, i can have a recession gift wrapped by christmas. next week is a very important week for earnings and data. kind of surprising. money is all about home building. the home builders have been the lynch pin of the now forgotten rally. those have been the stocks in the most bull mode. they have been the leaders. we will hear from two major ones. beezer is primarily in the south. not a great company. i wouldn't tell you to buy it.
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horton is nationwide. both hold the key to the re-ignition of the very important group. and i want to hear how badly the storms have affected the mid-atlantic day. retail stocks have become horrendous performers of late. perhaps the area i'm most worried about is because of the storm. and the newfound gloom because of the fiscal cliff. it has hurt small business creation. a bad pot -- if we had a bad known it would be better than good unknowns. dicks reports, home depot, michael kors, sachs and tjx. home depot will tell us if the horrific storm has had an effect on business or if the he building has begun. the worst thing we could hear
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from home depot is business is bad now but it could get good later. michael kors, we don't know. we have got find out how many stores last business. kors and sachs represent the upper end. so much of sac's business is in the high end retail. has it just reached the low point where even if you execute well it doesn't matter? sachs and kors will tell us. tjx is an off price player. can marshalls and home goods stir the group with excellent results? which we have come to expect from the consistent well run company. also we will hear from cisco. we are getting downgrades and worries galore. how the company could slash its outlook. stocks traded down in
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anticipation. even if they say, well, you know, things are not as bad as you hear, i don't think that it will get as bad as they say. are young people spending? how about pet owners? high end homeowners? abercrombie? hot topic? same with staples. williams sanoma and pet co are the same. pet smart the stock has been weak. look for that to turn. that might be the best stock of the week. thursdayly get results from dollar tree. this company started the decline. the terrible presentation about the weak economy has hurt sales. this is a trade down play. a weak economy is supposed to
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help sales. we also hear from walmart, gap, and target. and these three have been on a tear. can we continue? i think the storm might impact how well they're doing and i fear these stocks are all too high. maybe you sell some wednesday? on the other hand, the stock of ross stores has been horrendous already. maybe that one can bounce on thursday morning. i do think it's cheap and it has great growth. friday morning foot locker reports. as foot locker goes so goes nike. we have the goldman sachs industrial conference that starts monday. we think that china is turning. how much? how soon? we'll find out next week. tuesday's best buy. they're having an analyst day and this one should be down right comical. company is challenged everywhere. previous management wants to buy the company back, amazon.
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then we get the credit suisse. we will get the best of the best at this conference which is the biggest of the year for that sector. it also tells you what is big in the pharma pipe. and humana has an investor day next tuesday. this stock has been trash. sell sell sell! got hammered more than any other when romney lost the election. it doesn't have a game plan for obamacare. i think it tuz and the stock could react positively. that's another trade besides petsmart and ross stories. the fiscal cliff is a serious probable but you can't allow yourself to become so pessimistic that you lose sight of all the opportunities out there or the fact that as weak as things seem.
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while we have an audience filled with veterans, let's start with a question that comes alile further away from home. take a look. >> hey, jim, sending you horned frog boo-yahs from kuwait. now i'm an army reservist and we're redeploying next year. i'm going back to my job in the defense industry. what do you think defense contractors are going to be like next year in the stock market? >> it's a great question. this is the group that hangs most in the balance by this issue called sequestration. it's the defense spending budget that will be cut so that means they have got to rely on dividend. lockheed martin has the best, safest yield.
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i say that would be the one to get. now a question from the home front. >> hi, jim. bill from bonks, new york. i give you a big boo-yah from the armed forces of florida network. my question is from eog resources. we heard that insiders bought 4800 shares back into the stock is that alone enough for me to put it on my buy list? >> no. but it was an incredible quarter and a great vision for what's to come. i think that company is probably the fastest growing oil company in the world. it's got one of the best managements and i suggest that it is bought not just in the mid teens. i want you to have a full position. fiscal cliff needs a solution. i'm trying to offer one. "mad money" will be right back. [ applause ]
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>> coming up, testing positive? the market's taken a turn for the worse but cramer is researching ways to keep you in the green. tonight he's conducting some tests. find out if it could give your portfolio a shot in the arm. >> and later, american service? when ever you think of controversial ceo, his turn around of the too big to fail aig seems indisputable. cramer sits down with him to hear about challenges and victories. how he has brought his military experience to the boardroom and what is next for the insurance giant. >> plus two american presidents, 18 astronauts, over 200 years of history. the cadets of west point have arrived is cramer ready for his head to head with the black
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knights? stick around, you're about to find out. >> don't miss a second of "mad money." have a question? tweet cramer. send jim an e-mail to mat or give us a call at 800-743-cnbc. miss something? head to if we want to improve our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education.
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>> you've got the u.s. marines in afghanistan. >> in honor of my grandfather. >> in honor of my great grandfather. >> thank you to the veterans today and the ones that came before us to help make our nation free. [ applause ] . >> welcome back to our special salute to the troops show. we're proud to have so many brave men and women. i will gladly admit that there are some things the government does really well with national defense at the top of the list. but when you find yourself in a situation where we are at now,
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that's a problem. i'm a stock guy. i hate to pontificate about politics. it's supposed to be private. but with the fiscal cliff coming at the end of the year, politics actually matter. i am urging leaders to rise above partisan politics and solve this dire situation. the last time was in the summer of 2011. that was no fun time to be an investor. now the senator makes sense to stocks that could, just bring the register on some. with a moment like this, what you really so let me talk to you about something that is actually fun. if all the fiscal cliff worries come true, hinted that there is
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common ground and this makes it a great time to speculate on some biotech stocks. here is a sector that is almost completely immunized. you don't stop taking life altering drugs because of a recession. when the market gets difficult you have to find investments that hold your attention and keep your engaged. every portfolio should have one, just one, high risk speculative play. tonight i have a new one for you. tsro. this is a tiny 400 million dollar biotech stock. it is an oncology focused outfit dedicated to improving the life of cancer patients. it became public over the summer
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at $13.50 a share. i think it has room to run. they have a promising pipeline. three potential drugs, one of which is in phase three trials and could receive approval as soon as 2014. also is the fact that tesaro has prefk bloodlines. that is probably one of the most important things you can get. it has a fabulous track record. they are the same people who sold the big japanese drug maker for $3.9 billion back in 2007. that was 117% return for investors. they have already managed to sell one company for a big gain. tesaro may be an new company but it's run by old hands.
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they have a drug which is given to cancer patients to prevent chemo therapy induced nausea and vomiti vomiting. but the really great thing about this drug is that they have got the rights to it as part of a fire sale. the drug was originally developed by another company that was acquired by merk. they were forced to sell the drug. they sold the rights to opco and then it was licensed to tesaro. now they have what looks to be the most effective therapy for preventing chemo induced nausea. you can only imagine how big this drug will be. there will be meetings and conferences. they will be talking about it and every time they talk about
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it the stock will move higher. tesara has a drug that they are working with merk that is in phase one tests against solid tumors. they are also testing with non-cell lung cancer. these are many years away from being potentially approved by the fda. so if tesaro gives you one drug soon and two more that could amount to something way down the road. i think the anti-nausea drug could be worth 400 million. tesaro is cheaper than it appears. no debt and $5.19 of cash per share this is a $10 stock and i think that's too good ospeculation to ignore. you need stocks that can keep you excited while everybody else is freaking out about the fiscal cliff. a brand new biotech ipo with
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terrific bloodlines. money that has been forgotten about because of all the noise in washington. i think this is a good one. let's take some questions. >> jim, brian from baltimore. my question is on 3d systems. did well last quarter. should i keep that as a spec play? >> i'm not allowed to give individual advice on individual stocks at this level. but if you have a big capital gain in that stock because of the fiscal cliff, you have to take it this year. i'm afraid they will raise the capital gains rate where you will have to give away a lot of your gain to uncle sam. perhaps you sell some now. i like the stock. we're in that weird moment where i have to go into what the capital gain is. >> ralph from new york. proudly served in the us air
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force. my question is -- >> just a second. >> you are a legitimate rocket scientist. always good to have one on board. go ahead. >> earlier this year, with wti between 79 and 80 i scaled down. more recently, wti at 90 a barrel, i sold out. should i use the funds to scale back or should i switch to something more low beta and high yelding? >> where did you scale out? >> about 75, 76. >> get right back in. i think it's the perfect stock to be in. i think you're in great shape. go right back in. thank you for serving. tsro is fighting the fight. caution is key. don't pay up too much. this is the best ipo that i could find for 2012. after the break i will try to make you more money.
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>> coming up, american service? when ever you think of controversial ceo, his turn around of the too big to fail aig seems indisputable. tonight cramer sits down with him to hear about challenges and victories. how he has brought his military experience to the boardroom. >> the cadets of westpoint have arrived. is cramer ready for his head to head with the black knights of the hudson? stick around you're about to find out. in america today we're running out of a vital resource we need
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make sure you're ready. at ♪ >> hi, i'm air force captain shawn wilson. i'm currently serving in afghanistan. i have a message for my excruciatingly beautiful wife. a few more weeks and i'm bringing it home. i love you with all my heart. >> we celebrate our nation's troops. in order to take the celebration one step further, we have a chance to talk to an american international group, aig, largest insurance group on earth, having served as a lieutenant in the army. if you think of where aig was about four years ago when everybody thought the company was a goner and taken 182
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million dollars of bailout money just to stay afloat. not only has the government turned a profit but they are looking to sell the remaining stake in the company but this insurance company has righted itself in a major way. the stock got hit, falling 7%. and in part because of worries about losses from super storm sandy. bob has said that aig has got sandy covered and i believe him. he came on my old show saying that met life would be paying out all claims immediately and inspired real confidence in our nation because many thought the insurers couldn't pay. so let's talk to bob, the excellent president and ceo of american international group. graelt great to see you. in honor of this special
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veteran's day, have a seat. the federal government, the treasury department, the federal reserve, has thanked you for the incredible major that you have done in returning the money to approximate american people but i say thank you very much from these american people. >> thank you. [ applause ] >> i think it's very meaningful. okay, now -- >> by the way, i have gotten personal private thank yous, but there were a lot of people in government that went on cameras and talked about the people of aig and vilified them. we had people who had their children beat up in school because their parents worked for aig. we had people in america afraid to go home because of the way they were characterized pubically on television. when i said they were quick to attack them pubically, they ought to thank them pubically. private conversations with me doesn't help me. thank the people of aig. >> i was critical of the initial, but i want to thank
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people, too, from aig. what has been the chief accomplishment? >> for the company it's mainly first of all getting confident of our customers and that came through confidence of our employees and getting our businesses back up and running very effectively. that allowed us to create the money to pay back america. >> okay. i think that you're being too modest. i think this was one where everybody thought it would never happen and some management skills. it is management skills perhaps learned when you were in the army? >> first of all, my family made me go to military prep school in high school. we couldn't afford it at the time so i said how will we afford it? my mother said you can wash dishes and you can help clean. so i wound up becoming a dish washer and working my way through prep school but that was my beginning and i went through rotc and i went in the army. by the way it was during the vietnam war, but i was stationed
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in korea. what i learned is in the military, as a leader, you are responsible for people's lives. so therefore, you have to take that very seriously. when it came to aig or any job i have had since the military, people look to me for leadership because it's about their lives, their families, and their ability to make a living. that is what i got from the military is you, as a leader, have now signed on ownership of the lives you are responsible for. >> you are responsible for the lives of a lot of people who have been hurt of late in hurricane sandy. you told our own that it would not be a significant financial impact. others have said it is a little more of an impact than we thought. how does itd look upon further review? >> look, i think it's a big event. it's not one that is oversized for the size of aig.
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we are focused entirely on the claims coming in, employers who are trying to get buildings back up, getting the trains moving again. we had very big customers in new york. we are working with them. it's about getting the claims paid and getting everybody up and running. it's not the kind of financial situation that we're struggling at aig with what's going to happen yet. >> you have an impact book value of $61 and this will not impact it? >> there is no tips coming off the show today. >> how about explaining the disparity? i think the market has got it wrong? when we think that the book value in your case is actually being brought out by sales of major tuitions that realized profits. >> people are still wondering what the treasury will do. they still have 15.9% of the company. they will be smart and i expect them to continue to be smart.
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they are focusing on current shareholders. but the markets are nervous so as a result, the election on sandy has put a little damper. people were hoping we would continue to buy back shares. what we said is we have done a lot of that. $13 billion of buy backs this year. we are now focusing on our coverage ratio and credit ratings, our guarantees require very strong credit ratings. we are balancing between buy back and coverage ratio and credit ratings. >> the government can sell its stake. are you in touch with the t.a.r.p. official who has talked about the disposal of different t.a.r.p. assets? >> i talked to tim when he wants to know how things are going. tim is totally in charge of what the lend be. i think if he has any need to talk to me he will. but right now they are operating pretty independently.
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>> they have not told you they are going to sell it in two weeks? >> they don't have any need to tell us. >> you have been very clear. i have thumbed through december 5, 2007, full day analyst meeting for aig. in that i think it's important -- >> do you realize i was drinking wine in croatia and having a fabulous time during this meeting. >> marty sullivan said we are fortunate to have a a capital base that will absorb volatility and retain the resources to grow and take advantage of this uncertainty. i don't wake up in the morning worried that i will have to dilute the shareholders by cutting our dividend. they did all of that. stha thai still couldn't save
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it. maybe we should at some level, question the people who ran aig before you. >> i won't go to what happened before, i will go to where we are today. the reason i'm nor worried about being a -- as a savings and loan holding company, we have the federal reserve as our regulator. we run stress tests. we are thinking about liquidity. we're not taking our rating for granted. we will have outside regulators and the fed is capable enough to assess have we thought through our liquidity needs. the issue was not capital but cash. think didn't have cash. >> did they have the collateral? >> they had the collateral but they had no window to go to. it was given to other companies after aig got the bailout. other large institutional companies were given access to
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the fed window. aig had the same access, i believe that would have solved the liquidity crisis they had. >> it was just a question of a moment in time? >> it was cash. to meet collateral calls because in the end, the financial products that were put on the books that were bought by the fed, we believe almost all of that will acrete back to what it was supposed to be. it was a question of the markets had tanked, the way the accounting was done, the accounting was very aggressive at that point in time. it required too much cash to be put up on things that ultimately would have worked. >> i want to leave on a note of optimism. you have been a great leader of several companies. any advice to them about how to go about their life and how to lead? i think you're a born leader. >> well, thank you. if i may look at your audience,
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i appreciate all of you and your service. a lot of people sit at home and rely on all of us to do it for them and for you to step up and do that, i think it's a great honor. i thank all of you for what you do for our country. that's number one. they understand how to serve and to serve the country that's so important to them. what is it that's important to you? as a leader you have to decide what is it you want to do? and in some cases you want to be an individual contributor so you really want to lead. in other cases you want to take on that responsibility for other people's lives. as you think about what's important to you, you are bound to say to yourself, what do i love to do and if i would love to do that, you have got to figure out a way to do that. how much responsibility do you want to take up and enjoy the fact that you're taking on that responsibility. the rest of it gets easy. >> i want to thank you tochl a great american, a proud veteran.
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bob has done a remarkable job. thank you very much, president and ceo of ag. stay with cramer. >> coming up, two american presidents, 18 astronauts, over 200 years of history. the cadets of west point have arrived. is cramer ready for his head to head with the black knights of the hudson? stick arnoound you're about to find out. when you take a closer look... the best schools in the world... see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level.
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if he can't, no one can. that's why ally has a raise your rate cd. ally bank. your money needs an ally.
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as we honor bravery and service, this is mad money, after all, so we also honor business prowess. take a look at this great story. it's a perfect combination. >> a couple great things. >> i love the baby ators. >> hi, i'm captain ted and this is my wife molly and we're the co-founder of babiators.
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>> i have been a united states marine for ten years. as a military officer you have got make decisions in imperfect information environments but it certainly prepares you for trying to put together a business. >> when starting a business in a small economy, it's important to be as lean as possible because every dollar is needed. we recouped our initial equity in 30 days of sales. now in the past 12 months we have grown 1,000 percent. >> to the westpoint cadets who are watching today and the young men and women, the training you will receive in the united states military will prepare you for any number of challenges that will come your way in life. draw such energy from the young kids who are learning and have a desire to serve. it just reminds you that the fabric of america is still very strong both in our military and our business life. the american dream is very real and we will pursue it.
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>> and now it is time for the lightning round. when you play to this sound and then the lightning round is over rchl you ready ski daddy? time for the lightning round. go ahead, sir. >> so babiators, we would love to hear your thoughts on in order strom stock. >> that was a mistake. that was a buy and i think it goes higher. >> harley davidson. >> the quarter was very good. it was quite a remarkable quarter and the stock did not react and that's a good opportunity. i would be a buy. >> jim, my question is concerning facebook. what changes should we look for before we see it turn into a more long term investment stock. >> the mobile advertising is hot but the prices are weak. you have to wait for the big traunch of stock to be available.
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$18 is my price for that one. >> my question for you is how do you feel about microsoft? >> sit a boring stock. i would compare it to sherman williamss. probably not that exciting. >> what do you think of yahoo!? >> i like her very much. she has got a good business model. i would rather be in yahoo! than google. >> a big boo-yah who ya to you. to a young service man or woman, bristol? >> yes. i like that yield. i would learn from appreciation. >> hey, jim. i'm wondering about caterpillar? >> buy it right here. very strong numbers in the next 72 hours. 84 to 90 without much of a problem.
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yes. >> served with the unit one in vietnam. my stock is chevron. >> tried to buy it. 105 top for it. that's where you want to buy. >> buy, buy, buy. >> it's a buy. >> hey, jim, how you doing? glen from seaton hall, do you see any potential in ceasars? >> absolutely not. it should never have gone public. i would buy when it got to 100. that's it? and that ladies and gentlemen, is the conclusion of the lightning round. >> the lightning round is sponsored by td ameri trade. t b, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees. so he can worry about other things, like what the market is doing
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>> west point has been educating. jenls presidents. americans that have sored to great heights. tonight westpoint's finest are here and cramer is calling the cadets.
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>> in addition to protecting our country, fighting for freedom and defending liberty wherever it's threatened, cadets also have home work. tonight we are joined by the financial club to hear why they have chosen to serve our country. thanks for coming. go ahead and introduce yourself. why did you choose serving? >> hi, sir. i'm from new york and i decided to serve basically because growing up i tried to live by the quote from winston churchill. you make a living by what you get and you make a life by what you give. the class of 2014 had to make a commitment to serve after graduation. i thought it would be an easy decision since i already made the decision to attend and i worked hard to become an officer but it was a really difficult decision for me because i
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couldn't answer the why i wanted to serve but it boils down to the principle of giving. i have been given a lot. i have a phenomenal family. i have been given the opportunity to continue my education and i want to give back to the world that has given me so much and help the nation with all their issues. >> thank you somuch and thank you for all that you're doing. >> thank you, sir. >> tell me who you are? >> i'm cadet curtis from california. >> why did you choose westpoint? >> my parents have inspired my brother and i to serve and give back to our country. we found the service academies. when i was an incoming senior in high school i was given the opportunity to visit and it takes incoming seniors in high school and shows them the life of a cadet for a week. when i was there i was able to listen to a speech. if you go to the air force academy, your mission revolves
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aircraft, at the naval academy, it revolves ships. at west point your mission revolves aren't people. i wanted to be a leader of character that way. >> the toughest school in america. congratulations. >> thank you, sir. [ applause ] >> boo-yah, jim. i'm from baton rouge, louisiana. i decided to join the investment club here at westpoint because like you said we have a lot of home work and sometimes it's very hard to watch your show. this way we're allowed to get speakers to come into westpoint and speak of different investment opportunities. i would love to have the opportunity and the working knowledge to be able to talk to soldiers about good financial decisions that they might make. >> i'm always worried about soldiers and athletes. they are spending so much time doing what they do that they have to rely on others and sometimes i'm worried about who they rely on. can you tell me some of your
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funds top holders? >> sure. i do mutual funds right now. >> let's do that. thank you. >> hello, jim. i'm from new jersey. on behalf of the cadets and the investment club, i have a question for you. following our junior year, we're given an opportunity for career starter loan around $36,000 each year for each cadet group. because we have job security post graduation how would you recommend we invest that? >> i took mine and i rolled the dice. i bought some stocks and it did pretty well. that was way over the top. these are low interest loans, okay. if you can, you know, look, just stretch those loans out as long as you can. don't pay them. pay off a little bit. not all at once. that's the way to go. "mad money" is back after the break. [ applause ]
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>> how do you use a sell-off? how do you benefit from a sell-off? you can go back to stocks of companies that have done well and got hammered anyway. you have been waiting for a pull back. follow along action words but the approach i want to focus on tonight is to look at companies that are doing
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fabulously, terrifically. but that have stocks which simply got too expensive. so consider the case of whole foods. here is a company that reported an 8.3% increase in same store sales, one of the highest of all companies. it only has 342 stores with the ability to open as many as a thousand, that's what they would say on the conference call. it remains with institution sale of approval. it never ceases to amaze and the company has been allowed to close the price gap between itself. i always find the price a little daunting but they did the price compare. whole foods is spewing cash and has the least stretched balance sheet in the business. something that has allowed them to raise just this week by continuing to buy back stock. whole foods trades at a very expensive price. 31 times earnings.
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with ear doing apples to apples or tomatoes to tomatoes. this stock represents a massive capital gain for people. a giant tax hit next year, whole foods becomes public enemy number one for people investing in capital accounts. there is too much gain not to take something off the table. first you figured out where would whole foods be a gift? at what price would a 15% grower that can expand for years and years be regarded as cheap? what would you pay solving for x in an algebra equation, what would you pay for the roughly $3 that the company could earn? to me it might be 25 times earnings. you're not going to get a quality company like this on the cheap. not one with this reputation, management and balance sheet. i think anywhere close to 25 times earnings, this is how you
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use a sell-off. when whole foods gets to 75, maybe buy some and then maybe it drops down to 22 times earnings. that would be 66 dollars. the point is that we're trying to figure out if the market keeps going down, where wouldtr? sure if the growth rate slows you will lose a lot of money. that's the correct prisonment for higher growth investment. you can do this with a whole host of vast growing companies, i'm only picking on whole foods because the quarter was everything you could ever want except that the stock is so expensive that nothing could ever be enough. whole foods is a buy right now or wait for a better price. stick with cramer. [ applause ]
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>> or was he forced out just days before he was supposed to testify? and then what if the fiscal cliff just goes away? think how bullish that would be for stocks. the kudlow report just moments away.


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